Name: JANINE MAE SERPA

Course: MSME
Professor: Engr. JOHN N. CELESTE, MSME, DPA

Question:
What is the difference between managerial accounting and financial management accounting?
Example also of each.

In general, financial accounting refers to the aggregation of accounting information into

financial statements, while managerial accounting refers to the internal processes used to account
for business transactions.
Managerial accounting processes economic information to be used by management in
making decisions.
Financial accounting involves the preparation of general-purpose financial statements used
by various users in making informed decisions.

Aggregation. Financial accounting reports on the results of an entire business. Managerial

accounting almost always reports at a more detailed level, such as profits by product, product
line, customer, and geographic region.
Efficiency. Financial accounting reports on the profitability (and therefore the efficiency) of a
business, whereas managerial accounting reports on specifically what is causing problems and
how to fix them.
Proven information. Financial accounting requires that records be kept with considerable
precision, which is needed to prove that the financial statements are correct. Managerial
accounting frequently deals with estimates, rather than proven and verifiable facts.
Reporting focus. Financial accounting is oriented toward the creation of financial statements,
which are distributed both within and outside of a company. Managerial accounting is more
concerned with operational reports, which are only distributed within a company.
Standards. Financial accounting must comply with various accounting standards, whereas
managerial accounting does not have to comply with any standards when it compiles
information for internal consumption.
Systems. Financial accounting pays no attention to the overall system that a company has for
generating a profit, only its outcome. Conversely, managerial accounting is interested in the
Name: JANINE MAE SERPA
Course: MSME
Professor: Engr. JOHN N. CELESTE, MSME, DPA

location of bottleneck operations, and the various ways to enhance profits by resolving
bottleneck issues.

Time period. Financial accounting is concerned with the financial results that a business has
already achieved, so it has a historical orientation. Managerial accounting may address
budgets and forecasts, and so can have a future orientation.
Timing. Financial accounting requires that financial statements be issued following the end of
an accounting period. Managerial accounting may issue reports much more frequently, since
the information it provides is of most relevance if managers can see it right away.
Valuation. Financial accounting addresses the proper valuation of assets and liabilities, and so
is involved with impairments, revaluations, and so forth. Managerial accounting is not
concerned with the value of these items, only their productivity.